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Home > News and Opinion > Stocks Look to Start on High Note

Stocks Look to Start on High Note

Lee Siler | Monday, January 4th, 2010

Stocks are indicating a strong opening on the first trading day of the New Year. The question on everybody’s mind is whether or not stocks can perform anywhere close to 09′s performance? As intelligent investors, we know that at some point this year the Fed will start cutting stimulus to the economy and in fact, they already have to some degree.  Considering we’re at historically low interest rates there’s only one direction they can go.  Obviously, Wall Street is listening to every word the Fed says to try and get a clue when the tightening trend will begin.  The fact of the matter is that rates have started going up; it’s just the Fed Funds rate is still holding still.

I’m of the camp that stocks will have at least an average year.  And what I mean by average is 7-10%, simply because I believe money will start to flow out of bonds and have to go somewhere.  The logical place would be equities.  Bond investors are in a quandary with rates as low as they are.  Clearly bond prices will be vulnerable when we see the momentum of interest rates start to increase higher.

I’m advising my clients to stay with relatively short to intermediate term bonds, say 5-8 years.  These will not be as volatile as the longer term issues.  What’s more, I like bond funds as opposed to individual bonds.  Bond funds will be able to go “out with the old and in with the new” easier than an individual.  Of course, one of the top bond funds is the Pimco Total Return.  This is an investment grade corporate bond fund that has done extremely well in any interest rate environment.

I added a few new stocks to the list.  Please adhere to all stop levels

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